Should You Roll Your 401(k) into an IRA?

By: Horizon Bank Last Updated: June 10, 2014

401k-horizonIf you’ve changed jobs and have a 401(k) plan with your former employer, you have some decisions to make. You can:

Roll the 401(k) over into an Individual Retirement Account (IRA).
Transfer it to your new employer’s 401(k) plan.
Leave it where it is.
Ask yourself a few questions before you decide.

Do you want investment choices?
Most 401(k) plans don’t allow you the flexibility to manage your investments. Rolling over to an IRA account allows you to choose stocks, bonds and mutual funds.

Does your 401(k) include stocks?
If your 401(k) includes low-cost, high-value company stocks or mutual funds that you otherwise wouldn’t be able to purchase, it might be worth keeping.

Are you paying high 401(k) fees?
IRAs tend to involve fewer administrative and overhead costs than 401(k)s, so you will usually pay less for an IRA. There are even some No-Fee IRAs.

Will you need the money before age 59½?
It’s best not to withdraw retirement funds between ages 55 and 59½, but if you must, try to only take distributions for tax ‘qualified’ reasons that may avoid the 10% additional tax penalty.

Find out more about 401(k) plans at Horizon